Directors’ and officers’ duties

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A director of a company owes fiduciary duties to the company at common law, which are essentially to exercise care and diligence in the performance of their functions. In particular, a director must:

  • Act in good faith and in the best interests of the company. ‘Good faith’ contains both subjective and objective elements, in that a director must genuinely believe that he or she is acting in the company’s best interests and must also act in a way that an honest and reasonable director would act.
  • Exercise his or her powers for a proper purpose. In determining what is a proper purpose, the purpose motivating the exercise of the power must accord with the objective purpose for which the power was granted.
  • Not fetter his or her own future discretion. Directors must exercise active discretions and not improperly limit their decision-making authority. This does not prevent directors from delegating powers to others, provided such a decision is made with authority and is entered in the minutes of the company. Delegation is discussed further below.
  • Avoid conflicts of interest and duty. If a director must choose between favouring his or her own interests and the interests of the company, the director must usually choose the latter course. A director should attempt to avoid situations that have the appearance of a conflict of interest…

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